Date: Friday 15 Jun 2012
Engineering consultancy WS Atkins continues to reallocate resources into new, growth markets to keep its trading resilient through the downturn. The strategy is working. Contractors such as Atkins, which provides consulting, design and management services for large infrastructure projects, have had a difficult few years. This was especially the case for Atkins, as a significant UK-facing company. Management has responded by expanding abroad into new markets and the UK now represents just 49 per cent of its business, with a target of reducing this to 25 per cent. One key indicator of the health of Atkins underlying market is the group’s headcount because a consultancy’s major asset is its skilled staff. Yesterday’s full-year numbers showed that underlying headcount at the group rose 5.5pc over the year to 17,489. So, although the backdrop is a challenge, the company has managed its way successfully through the downturn by diversifying its geographic exposure. Last tipped at 732p on April 15, the shares are now down 5 per cent in line with the FTSE 100. However, the yield is supportive and the long-term prospects for this business are sound. Trading on a March 2013 multiple of 8.7 times falling to just 8.3, the rating on Atkins shares remains buy.
Retail group WH Smith has seen its share price tumble by about 12 per cent since the start of April. Yesterday’s statement shows the falls were unwarranted. WH Smith shares were first tipped at 529½p on October 14 last year, and they are now trading 8pc below that level after their recent underperformance. This compares with a 1pc fall in the FTSE 100. Trading on an August 2012 multiple of just 8 times, falling to 7.3 next year, the shares are at an unwarranted discount to the wider retail sector. Even Home Retail Group, which is expected update the market at its troubled Argos operations next week is trading on a multiple of 13.8. The shares still look good value and Questor expects the dividend policy will continue to be progressive. With the shares yielding a prospective 5.4 per cent, rising to 6 per cent next year the shares are a buy.
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